RBC Sees 4 Companies Benefitting From Higher Silver Prices
Editor's Note: Kitco readers, have your say! Check out our newest feature – KITCO CHAT! – where you can share your comments and ask questions directly to us.
(Kitco News) - One Canadian bank sees potential in the silver, expecting the market to bounce from oversold levels compared to gold, suggesting that if investors want exposure they might want to look at these four companies.
In a report Tuesday, analysts at RBC Capital Markets said Pan American Silver (NASDAQ: PAAS, TSX: PAAS, Wheaton Precious Metals (NYSE: WPM, TSX WPM, Hochschild and Coeur Mining (NYSE: CDE) offer the most potential in a rising price environment.
The analysts noted that since the gold/silver ratio peaked at a recent high of 78, inflows into silver-backed exchange-traded funds have accelerated, and are up 5% since the start of the year.
“Since the gold/silver ratio peaked at 78 on July 7, total silver ETF holdings have increased by over 12 [million ounces] and we have now added nearly 30 Moz since the start of 2017,” they said. “We view the acceleration of inflows into physical silver ETFs as a positive sign fundamentally, and expect ongoing inflows as we enter a seasonally strong period for precious metals during Q3 ahead of the Indian festive period in October.”
While down from its recent highs, the gold/silver ratio is still relatively elevated by historical standards, hovering above 76 with gold futures last trading at $1,241.40 an ounce and silver at $16.25.
RBC also sees silver as a contrarian play as speculative positioning is the most bearish it has been since August 2015. They added that this bearish positioning comes as prices appear to be “troughing.”
Finally, they said that they expected the silver price to remain supported as demand continues to outweigh supplies.
“We expect silver to remain in a physical deficit over the next couple of years with limited new mine supply, strong ongoing growth in photovoltaic demand, and a forecast rebound in electrical consumption, offsetting moderation in coin/bar demand,” they said.
RBC analysts said they expect silver prices to average the year at $18.28 an ounce, rising to an average of $19.25 an ounce in 2018.